(#16) - I Run A Fintech (19/07)

Bajaj Pay, PayTM's sachet-BNPL, More teenage-focused neo-banks

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Moving on to couple of last week’s updates!

Banks & NBFCs

🚀Product Launches

  • Bajaj Finance is looking to leverage Bajaj Pay to give non-linear growth for their EMI Cards business: Bajaj intends to release this in the Q2 of Fiscal FY21-22.

    “We will launch “Bajaj Pay” for consumers some time in Q4. We will launch “Bajaj Pay” mainly meant for our merchants. We are not looking at competing in where the big elephants are fighting. We have 103,000 merchant ecosystems. We move 7%- 8% of their commerce. We think we have an opportunity to double that volume in the medium-term, just staying with that organized ecosystem so that we further ring-fence it.”

    - Rajeev Jain, Bajaj Finance Q3 FY'21

    This is an inside-out strategy. Google launched its search engine in 1997 and then introduced the chrome browser in 2008. Until then, internet explorer had a 95% market share. Google integrated their search bar right into the browser and that made it the defacto browser. The Chrome OS (Android OS) further deepened that relationship by integrating both browsers and search embedded into it. Look at where Bajaj is going with this now. Bajaj is already toying with integrated commerce onto their platform, but these plans haven’t been put into force yet. Nevertheless, I see how this could grow into the eCommerce business as well. Bajaj’s 100,000 merchants already move $100 billion dollars of commerce today.

    “At a checkout page, you will see these four options. Based on the merchant, an EMI may appear, based on merchant, it may not appear. Based on a reward that we may offer to a merchant, it may appear, based on a merchant, it may not appear. That's how it will integrate with a broader B2B business. Today, you can walk into a store and use your reward points on a co-branded card and convert into margin. That's how it will integrate into the business. Today, monthly, Rs.5 crores to Rs.8 crores gets converted from reward points into margin money by customers to buy a product. This is how it will integrate at a fundamental level and many more ways as we deliver this between July and September.”

    - Rajeev Jain, Bajaj Finance Group Investor Call organized by Bank of America Securities June 09, 2021

    The application also doubles down as a payment instrument. Customers can choose to use either of the following:

  • Bajaj co-branded credit card

  • Bajaj EMI card

  • Bajaj Wallet (Bajaj recently got a license for the prepaid instrument)

  • Bajaj UPI Pay

  • Or any other instrument of their choice

    You see how powerful this becomes. All of a sudden all the payment options are within the Bajaj ecosystem.

“Now what is happening there is essentially it’s highly commoditized. What we are building is when we looked at Google Pay, PhonePe, Paytm, one of the areas that we find there is a huge gap. So what has everybody done in our assessment, it maybe a little cold view, is mainly thrown money at acquiring customers. I don’t need customers. I need engagement. I have, as I said, 120 million prospects. I have 50 million customers. I need engagement, engagement with day-to-day usage. And that’s really where this frame is – this payment stack is relevant for me.

- Rajeev Jain, Bajaj Finance Group Investor Call organized by Bank of America Securities June 09, 2021

Bajaj has a strong acquisition business via various acquisition channels (online/offline) i.e. Consumer Durables or infamously called BNPL.

Their strength however has been their ability to cross-sell customers faster than anyone else and continue the engagement with the customers throughout their lifecycle.

With Bajaj Pay, it will take a step further to engage with the customers for their payments as well. But how will they do that?

So we are investing in a rewards management infrastructure which we will have behind it – rewards will have reward points on one hand, a voucher management system on the other. So, it’s an integrated RMS platform that we’re creating, which is more complex than the normal rewards management systems you get. It will lead to the fifth last item on the checkout page of a consumer called adjust against rewards. So, you will be able to pay via of course wallets. You will be able to pay via credit cards, net banking, UPI. However, our view remains our 110,000 merchants, their $100 billion of commerce.”

- Rajeev Jain, Bajaj Finance Group Investor Call organized by Bank of America Securities June 09, 2021

Yup, a rewards infrastructure to incentivize the customers to use their application to make purchases.

Now further to that, Bajaj also intends to launch Bajaj Pay for merchants as well which means

“Once we launch merchant, and that's really what the team is working on, that as we launch Bajaj Pay for merchants, we intend to bring this back but in a completely new design. We did not shut it because we had a credit cost problem. We shut it because the model was becoming completely linear. We cannot then serve 200,000 merchants if we had a design on retail EMI card stores for which we will have to do linear staffing. As Bajaj Pay for merchants emerges, it creates a nonlinear way to grow this pool is really what we'll wait for and we'll build that out from second half of next fiscal onwards.”

- Rajeev Jain, Bajaj Finance Q3 FY'21

Bajaj had shrunk their retail emi business last year because of CoVid and restrategized its growth. In order to get a non-linear growth, Bajaj is rethinking how the Bajaj Pay app can also deliver that for them. Today their growth depends on adding headcounts as they add more stores.

Bajaj Finserv operates their EMI card business on a private network i.e. for every new merchant that adds onto their network they have additional overheads which include adding an executive, machines to transact on their network. With Pay, a couple of levers will start moving.

Payment is an area that is yet to be explored. I certainly believe that the current podium can’t be held for too long if eco-system lockin doesn't take place. Take a look around and see how you have been locked in by major brands for some of the products you have been using. That’s how businesses stay relevant and move into monopolism.


  • Axis Bank and Mumbai Metro One launched a co-branded Prepaid card: The prepaid card is a semi-open card that allows users to transact everywhere except withdrawals and redemption. Since the card will be NFC-enabled, it will allow the users to tap and pay for tickets at the entry gate and exit gates without waiting at the ticket counter. SBI and ICICI Bank have already launched their variants of Mumbai metro cards sometime back.

🔑Mergers & Acquisitions

  • Muthoot Fincorp acquires PayMatrix: PayMatrix is a bill payment platform for rent, maintenance, and vendor payment. PayMatrix has acquired 82,000 customers in the last 5 years.

    “This investment in Paymatrix will help us extend our existing lending business by giving us a competitive edge in terms of expanding our product offerings and make a foray into new markets and new customer segments,” said Muthoot Pappachan Group chairman, Thomas John Muthoot

    Inside-out. It’s not surprising to see lending businesses move into payments as they have stabilized their existing businesses.



  • HDFC acquires a stake in Virtuoso:Virtuoso Infotech, a Pune-based digital enterprise solutions provider has received funding from HDFC Bank. It's a service-based company that uses product development ideologies to build custom solutions for its clients.


🚀Product Launches

  • Paytm has launched sachet credit: PayTM has launched a new Buy Now Pay Later variance called Postpaid Mini in partnership with Aditya Birla Finance Ltd. Customers will get an amount between Rs.250 to Rs.1,000. Paytm already has a Buy Now Pay Later product called PayTM Postpaid which gives you a limit of up to Rs.60,000.

    Bhavesh Gupta, CEO - Paytm Lending said, "We want to help new-to-credit citizens start their credit journey and develop a financial discipline. Through Postpaid we are also making sincere attempts to help drive consumption in the economy. Our new Postpaid Mini service helps users manage their liquidity by clearing their bills or payments on time."

    Bhavesh Gupta is trying to say here that, since they are (or their lending partners are) rejecting new to credit customers today who are applying for the postpaid services, they are introducing this product Postpaid Mini. This is to:

    1. Minimize portfolio risk

    2. Understand customer profile and their activities.

    3. Eventually, build better products for this segment of customers.

  • ERoute Technologies launched a prepaid card for teenagers "OmniCard": ERoute Technologies, a payments solutions company has launched a semi-closed prepaid instrument "OmniCard".

They received their prepaid instrument license in May 2021. The card is marketed for teenagers. Co-founder Abhishek Saxena mentioned a significant advantage of having an independent PPI license.

Look, I agree with him on the first 2 points. There are compliance and UI/UX limitations when you are in partnership with a financial institution. You are blindsided by your partners most of the time and you have to comply to them which could be as per RBI or their internal compliance. You will never know. However, when you own a license, you need to self-regulate as well. You are under the RBI's scanner for all your activities. So there are pros and cons for both.

However, prepaid instruments need to be marketed which means a soft launch won't give those numbers. The company will have to spend a lot of dollars attracting a user base from various platforms.

  • Upstox's quant-based platform Raintech to be launched for equity for investors: Rain Technologies is a Quantitative Trading Platform or algorithmic trading platform created by the UpStox team back in 2018. Sets of rules either pre-written by the platform provider or written by traders to automatically enter and exit trades. This is the simplified fundamental of algorithmic trading. Quant-Based platforms take emotions out of trading and work only on algorithms or mathematically driven steps. On average, around 50,000 orders worth 5,000 crores take place every day on Rain Tech. A B2B-SAAS built for clients is now being launched for retail investors like us. Currently, the platform puts us on a waitlist.

  • Fyp pre-launches money management product for teenagers: Fyp stands for "For You", a TikTok trend use by content creators to increase their views. The company has used this hip-trendy name FYP to target teenagers. ~20% of India's population is between the age of 10 and 19. That’s ~26 crores. And one of the reasons why a lot of startups are targeting products to this segment. So what are the products that Fyp is launching? A prepaid card for teenagers and a money management app. This is similar to FamPay's proposition. My last post covers the challenges FamPay will face when this population matures to the working force. Currently, Fyp is on a waitlist and not open to the general population yet.


  • PayU enables payments on the WooCommerce platform: Woocommerce, an e-commerce plugin for WordPress has integrated PayU. The users who are running using Woocommerce for their business can enable PayU's payment gateway to accept payments from their customers. Woocommerce is estimated to be live on over 43,000 websites today in India. Woocommerce is already integrated with Razorpay, Instamojo, Cashfree, PayPal, and CCAvenue.

  • Flipkart enables PhonePe payments during CODs: PhonePe’s QR-Code solution has been enabled on Flipkart's ecosystem to accept payments from customers at the time of COD. When a customer receives a cash-on-delivery order from Flipkart, the package will have a QR-code attached to it. The customers can scan the QR-code to complete the payment.

Cash-on-delivery has reduced significantly from 60% to 28% today in the last 5 years. That is because of two factors:

  1. Trust in the online payments

  2. Trust in the commerce marketplaces

With Flipkart enabling PhonePe payments during COD, we will see other commerce players follow suit and bring down cash exchange even further. Does that mean that cash could become obsolete? Not really. Online retail forms only 4-5% of total retail in India. As more people enter the ecosystem, we will see them begin with CODs for various commerce marketplaces and then transition into digital payments over some time.


🌎Emigrate; Immigrate


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